OptionsHouse

Options Trading News

November 26, 2013  Tue 2:45 AM CT

PEG: SEE CHART GET CHAIN FIND STRATEGIES
Utilities have been weak, but one investor apparently thinks that Public Service Enterprise will keep grinding higher.

optionMONSTER's tracking systems yesterday detected the purchase of 1,800 March 35 calls for $0.60 and the sale of an equal number of June 35 calls for $0.81. Volume was below open interest in the nearer-dated contracts, which suggests an existing short-call position was closed and rolled forward in time.

The trader probably owns shares in the New Jersey utility company and had sold the March options as part of a covered-call strategy. He or she is now rolling that position forward in time, getting an additional $0.21 premium in the process and extending the trade by three months. The investor can also keep collecting the name's rich 4.3 percent dividend. (See our Education section)

PEG fell 0.57 percent to $33.42 yesterday but is up about 9 percent so far this year. That's slightly worse than the broader utility sector, while the S&P 500 index has gained 26 percent in the same period.

Total option volume was 32 times greater than average in the session.
Share this article with your friends


OptionsHouse

Premium Services

Archived Webinar

Education & Strategy

Real vs. Synthetic

We now know that there are two ways of creating a call position, a put position, and a stock position. We can simply use the actual real security or we can recreate it synthetically. We can create these positions in both long and short forms and this ability sets up an interesting scenario--an arbitrage!

View more education articles »